In some states, courts allow contractors to sue design professionals for negligence even in the absence of a contract. In others, like Maryland, courts apply a rule known as the Economic Loss Rule (ELR) to bar such claims. Courts apply the ELR when, without a contract in place, someone sues another for purely financial losses (i.e., not for personal injuries or property damage). The ELR is very important in the construction world because contractors who sustain losses that they attribute to substandard design documents often sue the design professional who prepared the plans and specifications, even though they rarely have a contract with the designer.

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In a recent case – Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP – the Maryland Court of Special Appeals (“Court”) reaffirmed the ELR and rejected various claims brought by a contractor against a design professional. The Balfour Beatty Infrastructure case involved a public works project for the City of Baltimore (“City”). The City entered into contracts with the design and engineering firm Rummel Klepper & Kahl, LLP (“RK & K”) to upgrade a water treatment plant. The City also entered into a contract with Balfour Beatty Infrastructure, Inc. (“Balfour”) to build the upgrades. Balfour did not have a contract with RK & K. Due to a series of design errors, Balfour suffered delays during construction and performed additional work that it attributed to the design errors. Based on these facts, Balfour sued RK & K for professional negligence and negligent misrepresentation, alleging that RK & K supplied false information to prospective bidders and failed to establish a  reasonable contract duration.

Continue Reading Can a Contractor Sue a Design Professional Without a Contract? Not in Maryland

By: Jennifer R. Budd and George E. Pallas

A bill allowing the New Jersey Turnpike Authority (“NJTA”) to enter into design-build contracts has been introduced in the New Jersey Assembly (A1561) and the Senate (S1211). The NJTA is the entity charged with maintaining and implementing capital improvements on the New Jersey Turnpike and the Garden State Parkway. The bill, if passed, would give the NJTA the discretion to administer any project through a design-build contract, rather than through the current design-bid-build method of procurement.

How It Will Work

According to the bill, if the NJTA decides to bid a project as a design-build, the NJTA must adhere to a two-phase procedure for awarding the contract. Under the first phase, the NJTA would qualify interested bidders, which may include joint ventures, by the issuance of a Request for Qualification. The Request for Qualification will list information such as the minimum qualifications needed by the design-build entity, a scope of work statement, the maximum time allowed for the project and the NJTA’s estimated costs of design and construction. Of the phase one bidders that respond to the Request for Qualification, the NJTA must select at least two but no more than five bidders to participate in a second phase Request for Proposal (“RFP”) solicitation.

For the second phase, the NJTA will issue an RFP to the remaining bidders. In response, those contractors will submit a technical proposal and a sealed price bid. The technical proposal will be reviewed by a technical review committee, given a score, and that score shall be submitted to the NJTA and made public. The NJTA will set a minimum technical proposal score, and any proposal that does not meet the minimum shall be rejected. Once the NJTA has determined which proposals have met the minimum score, the price bids will be opened publically, and the NJTA must award the project to the design-build entity with the lowest bid.

The Bill Has Some Traction

During the 2010-2011 term, legislators introduced a similar bill, and the Assembly Transportation, Public Work and Independent Authorities Committee unanimously passed it with amendments. The NJTA bill is very similar to the version passed by the Committee last year, which may be suggestive of the legislature’s belief that design-build bidding will be more efficient and cost effective for the NJTA.

Implications On Contractors

If passed, this bill could have widespread effects on highway and road contractors in New Jersey. Due to the high level of engineering, design and technical skill required to compete in price, and the cost of retaining such professional services, many small and mid-sized contractors could be squeezed out of the competition. On the other hand, larger contractors may enjoy the independence that often accompanies design-build construction since the contractors will have the benefit of design input from project inception.

Notwithstanding the additional independence, contractors should keep in mind that design-build projects are fraught with higher risk because design-builders are responsible for all phases of the project and any liability stemming from it. Additionally, unlike in design-bid-build construction where the contractor can look to the owner or the designer to share the costs from unanticipated circumstances, a design-build contractor is less likely to benefit from such cost-sharing.

Jennifer R. Budd is an Associate at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.

George E. Pallas is the Treasurer of the Firm as well as a Shareholder and member of the Board of Directors. He is also a Partner with the Firm’s Construction Group.

Daniel E. Fierstein, an Associate with the Firm contributed to this post.

data storage.jpgConstruction today is not your father’s industry. With the growing use of electronic forms of communication and document creation, the rules have changed. Businesses continue to strive for a paperless office. Now, rather than drowning in paper, however, they are drowning in email and new ways of communicating. How does a company deal with instant and text messaging systems, server-based voicemail, online storage of sensitive files such as health records, insurance claims, and financial databases, let alone emails and documents saved only on smartphones, tablets, laptops and the like?

On September 12, 2012, Cohen Seglias Partners John Greenhall and Lane Kelman presented on this topic and taught companies how to avoid the pitfalls of the information age, and better prepare for the continually changing role of technology in construction. They gave answers to questions such as: Does an email constitute adequate notice under the contract? Are electronic signatures binding? How should I keep my electronic documents? Why should I care if my project manager is saving emails on her cell phone and not the office server? The legal ramifications to how your company views electronic documentation are huge and can result in millions of dollars of losses if you are not careful. If you have questions about electronic document retention or electronic discovery, please contact us at jgreenhall@cohenseglias.com or lkelman@cohenseglias.com.

John Greenhall is a Parter at Cohen Seglias and a member of the Construction Group. His clients hail from all areas of the construction industry and include general contractors, subcontractors, architects, engineers, sureties and owners.

Lane Kelman is a Partner at Cohen Seglias and a member of the Consturction Group. He represents developers, general contractors, construction managers and the different trades in complex matters ranging from bid protests, contract negotiations and claim prevention & management.

By: Jennifer M. Horn

Construction owners and managers are utilizing computer tablets such as the iPad more and more on the job site to help streamline business. Engineering News Record posted a video clip and article about a few construction companies which have found that using tablets has saved them time and money.ipad.jpg

Paul Ozinga, co-owner of Ozinga Bros. Inc., said that he has seen, “enhanced productivity in the field” and that the tablets offer, “new ways to speed up communications, obtain client approvals, complete inspections, arrange logistics and manage other complications.” One example of how the tablets can help streamline work is that through an application, project managers can pinpoint the exact location of delivery trucks. This simple feature can facilitate a manager plan more accurately, and help projects stay on schedule.

Construction technology does not just stop with the iPad. New programs such as BIM are coming out in the market all the time. It is important for owners to learn what tools are most effective for their business in order to stay competitive in the marketplace.

Jennifer M. Horn is Senior Counsel at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

heat.jpg By: Jennifer M. Horn The Occupational Safety and Health Administration (OSHA) has launched a new smart phone application that will “enable workers and supervisors to monitor the heat index at their work sites in order to prevent heat-related illnesses.” The heat index application will allow a manager to quickly determine the heat risk at a job site and provide tips and ideas for how employees can avoid over heating such as:

  • drink fluids;
  • take breaks;
  • plan for and know what to do in an emergency;
  • adjust work operations, if possible, to avoid peak heat hours;
  • build up the workload for new workers gradually, not suddenly;
  • get trained on heat illness signs and symptoms; and
  • monitor each other for signs and symptoms of heat-related illness.

The free application will be available in both English and Spanish and can be downloaded from the OSHA website. Employers and employees alike have an interest in preventing heat related illness at the job site. Hopefully, the new OSHA smart phone application will aid in this effort. Jennifer M. Horn is Senior Counsel at Cohen Seglias and a member of the Construction Group. She concentrates her practice in the areas of construction litigation and real estate.

“Technology has transformed dozens of ways we interact with the world. How we communicate, learn, work, entertain, and provide for ourselves have all been radically altered by computers, sensors, and software. One area where technology is woefully underused, but sorely needed, is in roadway safety.”
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Patrick Sorek, Partner with Cohen Seglias recently authored an article for Highway Builder Magazine, titled “We Need Technology to Boost Our Traffic Management” which discussed the need for improvements in transportation technology. The article discusses new ideas for highway technology such as traffic control sensors and cameras to increase roadway safety.

To read the full article, please visit Highway Builder, and for more information, please contact Patrick Sorek.

Patrick Sorek is a partner in the Commercial Litigation Group of Cohen Seglias Pallas Greenhall & Furman PC. Mr. Sorek focuses his practice in commercial litigation, and has considerable experience in civil rights and employment cases.

As many contractors know, Pennsylvania’s attempt to formulate and use innovative procurement methods has incurred a series of setbacks from the Commonwealth’s appellate courts. The latest setback came when the Pennsylvania Supreme Court found that PennDot’s Design-Build Best Value (DBBV) procurement method violated the Pennsylvania Procurement Code.

Unless there is a potential for harm to the travelling public, Pennsylvania agencies, such as PennDot, are prohibited from procuring construction contracts through DBBV. Traditional methods of procurement require that contracts be awarded to the lowest responsible and responsive bidder. DBBV, however, allowed agencies to pre-qualify a short-list of design-build teams, and then select a design-build team’s proposal utilizing a best-value assessment methodology, that includes subjective and objective factors, to determine which proposal supplies the best value for the cost of the bid.

In the case of Brayman Construction Corp., et al. v. Commonwealth of Pennsylvania Department of Transportation, the Supreme Court of Pennsylvania enjoined Pennsylvania agencies from using DBBV because the practice does not comply with the Procurement Code’s requirement that construction contracts be awarded through the processes of sealed competitive bidding or sealed competitive proposals.

What Is PennDot’s Design-Build Best Value Bid Procedure?

DBBV is outlined in PennDot’s “Publication 448, Innovative Bidding Toolkit” (Publication 448) Publication 448 describes various innovative bidding methods for selecting contractors for highway projects. It explains that innovative bidding seeks, among other things, to account for social costs, such as disturbance to the traveling public, in addition to taxpayer dollar costs.

According to Publication 448, DBBV provides the agency “with the most potential for multiple design solutions and innovation in the use of materials.” Its goal is to “reduce overall time from design start to completion of the project, which provides for a shorter project completion time at a lower cost.”

DBBV is a two step process. The first step is aimed at creating a “short list” of three to five design-build teams which will eventually submit proposals for the contract. Prospective design-build teams submit statements of interest detailing their qualifications, the resumes of key personnel, and organizational charts. The statements of interest do not include a monetary bid. From the statements of interest, PennDot picks a short list of three to five teams that it considers best suited for the project.

In the second step, each short-listed team submits a technical approach and a price, which becomes the basis for a negotiated stipend agreement. To accomplish this, PennDot enters into a separate stipend agreement with the teams on the short list to develop a proposed design for the project. Thereafter, the design partner for each team develops a proposed technical approach and submits it, along with a price bid, to PennDot. PennDot then selects a design-build team based on which proposal offers the best value, not on a lowest competitive price basis.

Why Did the Supreme Court Severely Limit DBBV?

The general rule for procurement under Pennsylvania’s Procurement Code is that “[u]nless otherwise authorized by law, all Commonwealth agency contracts shall be awarded by competitive sealed bidding under section 512[.]”. One notable exception allows a procuring agency to contract for design professional services through a two-step proposal process.

In the case of Brayman v. PennDot, Brayman challenged PennDot’s attempt to procure design-build services urgently needed for replacement of the Six Mile Creek Bridge in Erie county. PennDot had proposed to select a design-builder via the DBBV process. As part of DBBV’s first step, Brayman, and its design partner, submitted a statement of interest. However, PennDot did not select Brayman for its short-list, and therefore, Brayman was precluded from submitting a proposal for the project.

Brayman initiated a lawsuit in an effort to prevent PennDot from awarding the bridge contract through the DBBV process. Brayman claimed that DBBV violated the Commonwealth Procurement Code. PennDot argued that the Procurement Code did permit public procurement on a design/build basis, and did not prohibit best-value selection. Alternatively, PennDot argued that design/build services were professional services, which were exempted from the competitive bidding requirements of the Procurement Code. The Commonwealth Court rejected PennDot’s arguments, holding that design-build contracts, because they include construction and not merely professional engineering and architectural services, were subject to the Procurement Code’s requirement of competitive sealed bidding.

The Commonwealth Court’s order enjoined PennDot from awarding design/build contracts “using the best-value method or any other ‘innovative method’ that does not award the bid based on sealed competitive bids.” On appeal, the Pennsylvania Supreme Court agreed that the design-build contract was a construction contract and therefore its procurement must comply with the objective requirements of competitive sealed bidding.

However, both the Commonwealth and Supreme Courts refused to enjoin PennDot’s award of the contract for the Six-Mile Creek Bridge project because the new bridge was so urgently needed to prevent a potential catastrophe.

What Does the Curtailment of DBBV Mean for Contractors?

The bottom line is that Commonwealth procurement agencies must use the competitive sealed bid process of the Procurement Code for all construction-contracts, including design-build contracts, unless the contract or project falls within an express statutory exception to competitive bidding or where there is an imminent danger to the public. While the Commonwealth appears determined to utilize non-traditional methods of procurement which it believes allows for a more rapid and efficient project delivery, for now, bidding on public road projects will be business as usual until PennDot is able to develop innovative methods that comply with existing procurement laws.

This article is the first of a series on Pennsylvania bid procurement practices and protests. Please look for part two of this series coming in August.

Building Information Modeling (BIM) is a technological process that allows building and construction data to be modeled and managed three dimensionally. The technology can be used to represent a building in ways that the more traditional drawings prepared by design professionals and utilized by contractors and subcontractors cannot. As is often the case with technological advancements, BIM is a technology with seemingly limitless potential to enhance efficiency and reduce errors in the construction industry, but it is not without potential problems and future implications that must be addressed as BIM becomes more prevalent.
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As an illustration to the double-edged sword that is BIM, the parties involved in what is believed to be the first major lawsuit relating to the use of BIM recently reached a settlement. Due to the confidential nature of the settlement, many of the facts that gave rise to the dispute are unknown. Here is what we know and what we can learn from the lawsuit.

The First Known BIM Lawsuit

The construction of a life-sciences building at a major university went awry when the mechanical, electrical and plumbing (MEP) contractor ran out of room in the ceiling plenum to assemble the MEP system. When the problem arose, the work was approximately 70% complete. The project architect and MEP engineer used BIM to fit the MEP system into the ceiling plenum, but the contractor ran out of room because no one informed the contractor that a very specific installation sequence was necessary for the system to fit.

As a result of this problem, the MEP contractor sued the project owner, the project owner sued the architect, and the architect’s insurance carrier joined the consulting engineering firm that designed the MEP system. Without the benefit of more facts, it is nonetheless obvious that the source of the issues that gave rise to this litigation was a breakdown in communication between the owner, the design professionals and the MEP contractor. Communication is critical in the construction industry regardless of the type(s) of design technology in use. The larger issue that the use of BIM raises is its potential impact on the traditional allocation of risk in construction contracts and documents.

The lawsuit that arose from this project brings to light two undeniable facts regarding BIM:

  • BIM can prove incredibly useful and efficient but not without close and regular communication between the designer and the installer; and
  • Construction contracts must address the allocation of the risks associated with the use of BIM so that the parties involved in design and construction of the project know their roles and responsibilities from the outset.

As we learn more about this particular project and other projects like it, we will provide a more substantive analysis of BIM’s effect on your businesses.

For an increasing number of contractors, survival in the current economy has resulted in the need to find and secure work in other states. The migration of contractors to neighboring states is apparent throughout Jobs.pngthe country. Besides the work itself, benefits of an expanded geographic footprint include a broader client base, thereby creating mutually beneficial relationships.

For a complete breakdown on which states are seeing the biggest increases in cross border work, please visit, The Construction Blog, which is a dedicated to construction software technology.

Construction Technology Facilitates an Expanded Geographic Footprint

Recent advances in technology are accelerating the migration of contractors to neighboring states. Such technology includes, but is not limited to:

  • Online Plan Rooms – This software aids contractors looking for jobs across state lines. A contractor can browse by project type, trade or location to find upcoming construction projects.
  • Bid Management Software – This program acts like a “virtual broker” and assists contractors in the bidding process, by connecting buyers with sellers.
  • Web Based Project Management Software – This technology allows for real time monitoring of construction projects.
  • Onscreen Takeoff and Cost Estimating – This tool allows contractors to build cost estimates for projects happening in other states.
  • Building Information Modeling (BIM) – BIM brings a project to life, through 3D, 4D and 5D models.

Contractors seeking an expanded geographic footprint should be aware of the upgraded technology as a means of facilitating work across borders.

With reports still coming in about the devastation in Japan, one thing is clear: had the 9.0 magnitude earthquake struck a populated coastal region of the United States, even greater destruction would have occurred.
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In terms of earthquake and tsunami preparation, Japan leads the way when it comes to disaster preparedness. “If any country understands [the] interplay of earthquakes, waves and buildings it is Japan, which has developed stringent building codes and well-rehearsed evacuation plans.” Even with all the precautions taken, Japanese public broadcaster NHK reported that, “63,000 buildings had been damaged, more than 6,000 of them obliterated.”

Trouble in Japan for Nuclear Power Plants

However, even the most advanced seismic retrofitting and planning is not catastrophe proof, as demonstrated by the effects of last week’s earthquake and tsunami. Japan is currently witnessing “all kinds of damage from the quake, including power outages…radiation leaks from nuclear power plants, fresh water shortages and fires.”

One nuclear power plant in particular, Fukushima, could not withstand the aftershocks from the quake. After ongoing aftershocks struck the plant, explosions at multiple Fukushima reactors occurred and technicians battled to stabilize additional reactors which were reportedly at risk of fuel-rod meltdown.

Early this morning “A fire and a fresh aftershock struck the Fukushima nuclear plant…The government confirms that the level of radiation around the reactor has risen, requiring the remaining 50 technicians to briefly evacuate to a safe place.”

What the U.S. Can Learn from Japan’s Earthquake

The explosions at Fukushima have had a chilling effect on the U.S. Nuclear Regulatory Commission (NRC). Numerous power plants across the country, including Exelon Nuclear’s Generating Station and the Peach Bottom nuclear plant, both located in Pennsylvania, will be reviewed for their safety standards. Neil Sheehan, a spokesperson for the NRC stated that:

Advances in seismic science have prompted his agency to undertake a project to review safeguards at some of the nation’s nuclear power plants as they relate to any seismic issues specific to each plant’s location…These plants were all built to withstand seismic activity…but a lot of them were built in the 60s and 70s and our ability to gather seismic data and do computer modeling on that data is much improved since then.

According to Senator Joe Lieberman, chairman of the Homeland Security and Governmental Affairs Committee, “Power plants are required to withstand the highest-probable earthquake in each region where they’re built; the U.S. also has emergency evacuation plans in place near plants.”

New Power Plants Under Consideration

The NRC had plans in the works to review many existing U.S. nuclear power plants before the latest earthquake struck Japan, and a major reason for that was due to the recent surge in new applications for the construction of power plants. “After a 30-year hiatus, several new plants are now under consideration,” and the U.S. has been working to re-start nuclear power plant construction as a way to reduce its dependence on fossil fuel and curb greenhouse gas emissions.

In light of what has happened in Japan, Lieberman believes that we should not begin building any new plants until we gather more information on what went wrong in Japan.

Lessons Learned

The damage caused by natural disasters like the recent earthquake in New Zealand and the earthquake and tsunami in Japan should serve as a lesson to contractors that seismic retrofitting is going to become a standard for future projects, particularly in the case of large infrastructure projects such as bridges, dams pipelines and power plants. It is important to stay abreast of new regulations as they come out, and adjust building plans accordingly. Even in areas where natural disasters are less likely to occur, projects will have to adopt to new standards, as demonstrated here in Pennsylvania, where two nuclear power plants are being reviewed for safety standards.